Malaysia to respond with ‘might and tact’ if EU proceeds with palm oil curbs

Malaysia's King, Sultan Mohammad V (2-L) inspects the guard of honor during the opening of the first meeting of the sixth term of the 13th Parliament sitting at the Parliament House in Kuala Lumpur, Malaysia, 05 March 2018. [EPA-EFE/AHMAD YUSNI]

Malaysia will respond with “might and tact” if the European Union proceeds with a plan to limit use of palm oil in biodiesel, a cabinet minister said on Tuesday (5 March).

“Malaysia does not want a trade war with Europe but if one is foisted on us, we will respond with might and tact,” said Mah Siew Keong, Malaysia’s minister for plantation industries and commodities, speaking at an industry conference in Kuala Lumpur.

The EU in mid-January approved draft measures to reform its power market and reduce energy consumption to meet more ambitious climate goals. The draft includes banning the usage of palm oil in motor fuels from 2021.

The European Parliament decided today (17 January) to phase-out palm oil by 2021 and cap the crop-based biofuels at the 2017 member states’ consumption levels and no more than 7% of all transport fuels until 2030.

Mah said Malaysia, the world’s second-biggest producer of the oil used in everything from soap to foodstuffs, would withhold cooperation on trade talks if the EU move is confirmed. A significant portion of the palm oil exported to the EU is used as feedstock to make biofuel, leaving Malaysia’s producers fearing overall demand will fall.

“There will be no trade negotiations until we solve the palm oil issue,” Mah said in a speech, describing the EU’s plan as “discrimination”.

The European Union is the world’s second-largest palm oil importer after India, having bought 6.7 million tonnes in 2016/17, according to US Department of Agriculture data.

Commenting on India’s recent move to increase import duties on palm oil, Mah said the trend of increasing duties is a protectionist policy.

“We will write to our Indian counterparts to ask them to consider,” he told, speaking to reporters at a news conference after his speech.

India has raised import tax on crude and refined palm oil to the highest level in more than a decade, the government said in a statement last Thursday, in a move designed to support local farmers.

The European Parliament’s decision to ban palm oil, is “drastic and discriminatory” and Kuala Lumpur is ready to retaliate with its own trade measures against Europe’s products if the ban takes effect, Malaysia’s Minister Datuk Seri Mah Siew Keong told EURACTIV.